ORDER
K.A. Mohamed Shafi, J.
1. This application is filed by the Official Liquidator under Section 446(1), (2) and (3) of the Companies Act to stay all proceedings in O.S. 802/97 pending before the Munsiff’s Court, Belgaum.
2. According to the applicant, M/s. New Kerala Chits and Trades (P) Ltd. is under liquidation and by order dated 18-1-1980 in C.P. No. 14/78 this Court ordered winding up of the company and appointed the Official Liquidator as the Liquidator of the company. He has also contended that a decree was passed in C.C. No. 274/82 against the respondent and for recovery of the decree amount of Rs. 40,216/- revenue recovery proceedings were initiated through the District Collector, Belgaum. The respondent has filed O.S. 802/97 before the Munsiffs Court, Belgaum in Karnataka State for a permanent prohibitory injunction against the defendants including the Official Liquidator from recovering the amount through revenue recovery proceedings without obtaining leave of this Court as required under Section 446(1) of the Companies Act. Therefore, according to the Official Liquidator that suit is liable to be stayed.
3. The respondent has contended that the permission of this Court under Section 446(1) of the Companies Act is only necessary whenever legal proceedings are instituted or continued against the company where a liability is intended to be fastened on the company or its assets. According to him, a suit or proceeding commenced by a person with the object of escaping from the liability arising out of a proceeding commenced by the company itself does not require permission of this Court as provided under Section 446(1) of the Companies Act. He has also contended that the Kerala Revenue Recovery Act is applicable only within the State of Kerala and does not applicable beyond the limits of Kerala. He has also contended that since the decree against him is clearly barred by limitation and not enforceable in law, he has filed the suit in the Munsiffs Court, Belgaum only to establish the legally sustainable pleas. He has further contended that the Official Lequidator has no right to initiate revenue recovery proceedings under the Kerala Revenue Recovery Act against a person that too outside the territorial limits of the Kerala State.
4. The facts that a decree was obtained by the Official Liquidator against the respondent in C.C. No. 274/82 and when the Official Liquidator attempted to recover the decree debt by initiating revenue recovery proceedings against the respondent through the District Collector, Belgaum, the respondent filed O.S. 802/97 before the Munsiffs Court, Belgaum for a permanent prohibitory injunction restraining the Official Liquidator and others from proceeding with the revenue recovery proceedings, are admitted.
5. The first contention of the respondent is that since the suit filed by him before the Munsiffs Court, Belgaum is not instituted by him against the company under liquidation to fasten any liability upon the company and it is only a proceeding instituted by him to escape from the liability arising out of the proceedings already initiated by the company against him, there is no necessity to obtain permission of this Court as provided under Section 446(I) of the Companies Act. According to the respondent, as the company in liquidation has already obtained a decree against him and it is put in execution by invoking the provisions of the Revenue Recovery Act, he has filed O.S. 802/97 before the Munsiffs Court, Belgaum to prevent the Official Liquidator from proceeding against him for recovery of the decree debt which is only a defensive measure to escape from the liability resulted from the proceeding initiated by the Official Liquidator. In support of this contention the counsel for the respondent has relied upon the decision of a Division Bench of the Lahore High Court in Jiwan Dass v. Peoples Bank, AIR 1937 Lahore 926 and a decision of the Full Bench of the Allahabad High Court in Rahmat Ali v. Calcutta National Bank, AIR 1955 Allahabad 169. Though both the above decisions are rendered considering Section 171 of the Companies Act, 1913, the principles laid down in those decisions are applicable to the facts of this case coming under Section 446 of the present Act. But I am afraid that the observations made in the above decisions establish that they rather supporting the contentions of the respondent, support the contentions of the applicant herein.
6. In the decision reported in AIR 1937 Lahore 926, the contention raised was that the defendant in a suit filed by the company under liquidation cannot institute an appeal without obtaining the leave of the Court under Section 171 of the Companies Act. In that context the Division Bench of the Lahore High Court observed as follows:-
“In this case also, it was the Bank which had instituted the suit in the first instance and had come out successful in the litigation. The appellant cannot, in these circumstances, be said to have proceeded with or commenced any legal proceedings against the Company.”
In that judgment the Division Bench of the Lahore High Court relied upon the judgment of the House of Lords reported in (1901) 85 LT 141 (Humber v. Griffiths) and quoted the observations of Lord Davey in that judgment as follows :
“When once an action by the Company itself has been proceeded with, there is no necessity for the defendants in the action to obtain leave for any defensive proceeding on their behalf, and further remarked that the respondents having been successful in the lower Court cannot now object to the appellants defending themselves against the consequences of the judgment by the ordinary means of an appeal to this House.”
7. In the case that came up for consideration before the Full Bench of the Allahabad High Court reported in AIR 1955 Allahabad 169 the Calcutta National Bank Ltd. filed a suit against one Qudratulla and his son Rahmat Ali Fatehulla for recovery of money alleging that the father was the debtor and the son had guaranteed repayment of the debt and obtained an order of attachment before judgment in respect of certain properties. Rahmat AH Fatehulla had claimed that those properties belonged to him exclusively and that contention was negatived and the objection against attachment of property was disallowed. After trial the suit was decreed against the father and dismissed the suit against Rahmat Ali Fatehulla finding that the plaintiff has not proved that he was the guarantor. When the properties were put up for sale in execution of the decree Rahmat Ali Fatehulla raised objection in the execution Court claiming that the properties are his individual properties. He also filed an application in the suit contending that since the suit was dismissed as against him, the attachment before judgment also stood discharged as the property belonged to him exclusively. The execution Court disposed of both the applications by a common order upholding the contentions of Rahmat Ali Fatehulla. The appeal preferred by the Bank was allowed by a Division Bench of the Allahabad High Court. After the appeal was allowed the Calcutta High Court passed an order winding up the Bank. Thereafter an application was filed for review of the judgment. In that review application a preliminary objection was taken that no review application could be filed without the sanction of the Company Court under Section 171 of the Companies Act. By a reference to the larger Bench as there was difference of opinion between the Judges of the Division Bench, the matter came up before the Full Bench of the Allahabad High Court. The Full Bench after elaborate consideration of various decisions of the various High Courts, House of Lords etc. observed as follows:
“The words ‘against the company’ must mean a proceeding where a liability is intended to be fastened on the company or its assets and not a proceeding commenced by a person with the object of escaping liability arising out of a proceeding commenced by the company itself. It would probably be useful to clarify the position a little further. If a person wants to file a suit to escape liability on the ground that the company’s claim against him is unfounded, it is a proceeding against the company, but where the company has stated the proceeding, that is, put forward its claim in a Court of law, any remedy available by way of defence to escape liability, which the company wants to fasten on him, should not be deemed to be a proceeding commenced or continued against the company and in such a case the question, whether the claim was put forward or the suit was filed by the company before or after the winding-up order, should make no difference.”
The Full Bench further observed as follows :
“If, however, the proceedings in a Court of law are started by a person other than the company, either with the object of fastening a liability on the company or with the intention of escaping a liability in respect of a claim which has not been brought into Court by the company itself, the permission of the Company Judge is required for the institution or the continuance of the proceedings. For instance, if a person files a suit for a declaration that the company owes to him a certain sum of money or that he does not owe the company any sum of money, the permission of the company Judge is necessary. If, however, the company has instituted a suit or other proceeding to enforce a claim, any action taken by the defendant or the opposite party by way of defence, or if the company has obtained a decree or order, any defensive action by way of appeal, revision, review or setting aside of an ‘ex parte’ decree or order should not require the permission of the Company Judge.”
8. From the above observations of the Full Bench of the Allahabad High Court, it is clear that permission of the Company Court Under Section 446(1) is not necessary for a defendant or the respondent in a suit or proceeding initiated by the company under liquidation either before or after the winding up order is passed, to take any defensive proceedings in that suit or proceeding by way of an appeal, revision, review, setting aside an ex parte decree or order passed etc. and it is nowhere stated in that judgment that the defendant or the respondent in the suit or proceeding can institute independent and distinct proceeding so as to prevent the company under liquidation from proceeding with the suit or proceeding or taking appropriate steps for realisation of the decree amount by executing the decree passed in such suit or proceeding. If the contention of the respondent that filing a suit to restrain the company under liquidation from realising the decree debt in appropriate proceedings either by way of execution of the decree or by resorting to revenue recovery proceedings is a defensive step in the suit instituted by the company under liquidation is accepted, the very purpose of the enactment of Section 446 of the Companies Act will be defeated. Therefore, the contention of the respondent that the suit filed by him before the Munsiffs Court. Belgaum for a permanent prohibitory injunction against the liquidator from proceeding with the revenue recovery proceedings as provided under the Revenue Recovery Act for realisation of the decree debt due from him is not a proceeding against the company and it is only a defensive measure taken by him to escape from the liability arising out of the proceedings commenced by the company and as such no permission of this Court is necessary under Section 446(1) of the Companies Act, is absolutely unsustainable.
9. The argument advanced by the counsel for the respondent that the provisions of Section 446 of the Companies Act should be construed liberally so that defensive actions of this nature will not come within the ambit of the section is not sustainable since by any liberal interpretation the provisions of Section 446(1) of the Companies Act cannot be stretched to exclude from its ambit the independent proceedings initiated by a person against whom a decree for money is obtained by the company either prior to or after the winding up order to restrain the company from resorting to the steps available under law for recovery of the decree debt.
10. It is vehemently argued by the counsel for the respondent that the decree obtained by the company against him is barred by limitation since long back and therefore the amount cannot be claimed by resorting to the provisions of the Revenue Recovery Act against him.
11. In the decision in Kerala Fisheries Corporation v. P. S. John (1996) 1 Ker LT 814 (FB) a Full Bench of this Court held that the provisions of Limitation Act are applicable only to proceedings before Court and they do not apply to proceedings before Collector under Revenue Recovery Act and the Collector is not acting as Court or no adjudication is involved before taking action under the Revenue Recovery Act. Therefore, in view of the fact that the provisions of the Limitation Act are not applicable to the Revenue Recovery proceedings initiated by the Collector, this contention of the respondent is also absolutely unsustainable.
12. The next contention of the respondent that the Official Liquidator has no right to initiate Revenue Recovery proceedings is also not sustainable since by notification No. G.O. MS. No. 418/94/RD dated 2-8-l994 under Section 71 of the Kerala Revenue Recovery Act, the Government of Kerala declared the provisions of the Kerala Revenue Recovery Act, 1968 applicable to the recovery of amounts due from any person to the Official Liquidator.
13. The further contention that the Official Liquidator cannot recover any amount from the respondent by invoking the provisions of the Kerala Revenue Recovery Act and enforcing the same in Karnataka State against the respondent is also not sustainable since the State Governments are resorting to Revenue Recovery proceedings on reciprocal basis. Therefore, the Official Liquidator, Kerala is perfectly competent to invoke the provisions of the Revenue Recovery Act and realise the debt from the respondent in Karnataka State through the District Collector concerned.
14. From the foregoing discussions it is clear that all the objections raised by the respondent in this case are not sustainable and the applicant-official Liquidator is entitled to get the suit in O.S. 802/97 and all proceedings in the suit now pending before the Munsiffs Court. Belgaum stayed under Section 446(1) of the Companies Act.
Hence this application is allowed and ad interim order of stay already passed is made absolute.